Key Governance Developments - January 2021
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Nasdaq proposes rule requiring listed companies to boost board diversity
The Nasdaq stock market has proposed a rule change that would require most of its 2,500 listed companies to have at least one board member who is a woman and another who is black, Hispanic, native American, LGBTQ+ or a member of another under-represented group. Companies that do not comply will have to explain their failure to follow the diversity requirement. The proposal will require permission from the Securities and Exchange Commission, but leading asset managers including BlackRock, Vanguard and State Street Global Advisors have already said they may divest from companies that do not embrace board diversity and other environmental, social responsibility and governance issues, while Goldman Sachs has stopped underwriting IPOs for companies in the US and Europe that do not have at least one diverse director.
Best source: S&P Global Market Intelligence
Asset managers warn against UK dual share class proposal for London exchange
The UK Investment Association has warned that government plans to change listing rules for the London Stock Exchange could damage the principle of one share, one vote. The government is considering reducing the free float requirement for the exchange's main board from 25% to 20% and authorising dual-class share structures in order to attract more fast-growing technology companies to list in London. The asset managers' body instead recommends that digital technology should be introduced to speed up the listing process, and says that if the reduced 20% free float threshold is adopted, companies should be required to comply with a 25% minimum within three years.
Best source: Sky News
Malaysian palm oil industry faces restrictions under EU sustainability plans
Paolo Vergano of Brussels law firm FratiniVergano says the Malaysian palm oil industry must engage with the EU and UK authorities over plans to restrict the distribution of products that involve deforestation and poor land use in the European single market. The EU initiatives on sustainability in forests, food, farming, land use and supply chains will target palm oil production directly or indirectly because of its role in deforestation. The EU’s initiative to improve governance and the integration of sustainability by the food industry, as part of the European Green Deal and the EU’s Farm to Fork strategy, will also affect the palm oil industry.
Best source: Malay Mail
BlackRock votes against directors’ re-election at Top Glove over migrant employee conditions
BlackRock has voted against the re-election of six independent directors at Malaysian personal protection equipment manufacturer Top Glove over concern that the health and safety of migrant workers has been flouted during the Covid-19 pandemic. BlackRock, which holds 1.61% of the company’s stock, says Top Glove has failed to introduce policies to protect the health of employees living in corporate dormitories. However, all six directors were re-elected.
Best source: The Edge
Korean regulator investigates law breaches in lending to Samsung Securities executives
South Korea's Financial Supervisory Service is to launch a full-scale inquiry into allegations that the country's largest brokerage firm, Samsung Securities, breached financial market legislation by lending to its executives between 2015 and 2018. Park Yong-jin of the Democratic Party of Korea says the company lent more than KRW10bn ($9.1m) to executives at subsidiaries, contravening the Capital Market Act ceiling of KRW100m. The regulator will also look at Samsung Securities' compliance with rules governing areas including corporate governance, internal control systems, financial stability and consumer protection. The firm was previously subjected to a comprehensive inspection in 2018 after it mistakenly paid stocks rather than cash as dividends to employees.
Best source: Korea Herald